India set to become world’s biggest buyer of gold imports through dedicated bullion exchange

India is poised to save billions of dollars in foreign currency over the years as the world's biggest buyer of gold routes sizable annual imports through a dedicated bullion exchange Prime Minister Narendra Modi believes that the country will become the metal's rightful market maker from a passive price taker. The cost of the Bullion Exchange IIBX at GIFT City could be as high as $50 a kilogram initially, as the Bullion Exchange IIBX at GIFT City becomes the preferred platform for gold consignments in a country where the yellow metal has beaten all competing asset classes as the traditional store of value. For every 100 tonnes of gold imports through the exchange, jewellers could save up to $5 million in forex by using the exchange platform instead of buying metal from banks. With the exchange becoming the primary conduit, banks could lose ground in this business, dealers said. A jeweller can't reverse the order without any penalty if it places the order with a bank. There is no such compulsion on an exchange platform unless their bids match with the seller's. This leads to better price discovery. Ashok Gautam, CEO at International Bullion Exchanges IFSC, said the bullion exchange is the first such transparent platform where jewellers can directly put up bids to import physical gold. We expect a surge in participation from both buyers and international sellers. The Prime Minister dedicated to the nation was on board with 64 jewellers at the launch of the bullion exchange. More than a dozen other applications are currently under process, and the exchange received more than two dozen inquiries from jewellers in the last few days, market sources said. In GIFT City, IIBX has three vaults where 446 tons of gold and 2,580 tons of silver can be stored. It is sourcing physical gold from top global bullion banks. JP Morgan, Citi, Standard Chartered, and ICBC are some institutions that have either supplied physical gold or are in talks to do so. Individual banks could not be contacted immediately. Ahammed MP, chairman, Malabar Gold Diamonds, said that we will be importing gold through IIBX to meet our requirements. Since nominated agencies are designated to import gold, gold prices are distorted. The exchange will bring order and transparency to the price-setting mechanism of gold. For big jewellers like Malabar Gold, direct importing gold through the spot exchange will be advantageous. India had imported 837 tons of gold in FY 22. This translates into $41 million savings considering the anticipated cost savings from exchange trading $50 kg. This assumes that the entire amount of gold is imported through IIBX. It is expected that IIBX will take a 40% share of the metal's imports into the country. The spot exchange opens a new route to import gold by trade, said Bhargav Vaidya, leading gold trade analyst. Demand for gold imports has to go up. Since the exchange will work as a benchmark for the quality of the bullion, the import of gold through the exchange ensures purity and standardization.